Mining could be the best thing to stabilise the South African economy

How can mining help to change South Africa’s economic outlook after the country emerges from the COVID-19 crisis?

The Minerals Council of South Africa believes that mining could be critical and particularly effective in helping to boost economic recovery after the country emerges from the COVID-19 crisis.

It is evident that in order to tackle the effects of the current situation, South Africa will be required to pass a set of constructive economic reforms to improve the country’s financial performance and productivity. These measures are also going to be critical for achieving previously set targets to reduce poverty and unemployment. Unfortunately, the only way South Africa can return to a reasonable investment grade will be through significant economic restructuring, especially since Moody’s has now lowered South Africa’s credit rating. Earlier this year, the country’s economic growth forecast was similarly greatly reduced, boosting the need for sizable economic restructuring.

The South African government has certainly been proactive in its response to COVID-19, with the country now in a 21-day lockdown. The lockdown has generally been well-received and supported by business, including the Minerals Council of South Africa. The collaborative efforts of the Department of Minerals Resources & Energy and the Minerals Council have shown that the country is putting the health of employees first and is committed to delivering essential services and minimising the damage to the operational capacity of the sector.

Industry experts believe that the 21-day lockdown could have a positive effect on metal prices in the longer term. It is forecast that platinum will benefit most from the current situation, a boon for South Africa, which last year contributed close to 75% of global output. The lockdown will particularly benefit those producers who are able to keep a sizable proportion of operations functional due to heavily automated processes and successful implementation of new technologies.

Iron ore could similarly benefit from the current situation, given that South Africa is one of the largest producers, whilst Chinese demand is slowly recovering as the country successfully leaves the COVID-19 crisis phase. Furthermore, the interest in bulk commodities has remained relatively high despite global quarantine measures being rolled out across some of the world’s largest economies.